Devaney v. Ancient Order of Hibernians Life Insurance Fund

Dibell, C.

This action is brought by the plaintiffs to recover of the defendant Ancient Order of Hibernians Life Insurance Fund the sum of $1,000, the amount of a certificate of membership issued by it on the life of John A. Devaney, their brother. Hpon the ex parte application of the defendant insurance order, John Heinen, administrator of the deceased, was joined as a defendant.

The case was tried to the court without a jury. The court made findings of fact and conclusions of law directing judgment against the insurance company for the sum of $1,000. The defendant insurance company appeals from the order of the court denying its motion for a new trial.

1. Devaney entered into his contract of insurance with the defendant order on September 29, 1899. His mother, Elizabeth Devaney, was the beneficiary. She died March 1, 1908. No change of beneficiary was made. The plaintiffs, his brothers and sisters, are his only heirs and next of kin.

The first inquiry relates to the disposition of this fund of $1,000. No claim is made that the fund should revert to the order nor that it should go to the heirs of the beneficiary. On the record, it stands conceded that it should go either to the heirs of the deceased, as beneficiaries, or that it should be a part of the estate, first for the creditors and last for. the heirs.

The corporate existence of the defendant is alleged and admitted. The character of its organization is not admitted. A suggestion is made by counsel for the defendant that the character of the organization does not appear, and that the court cannot say that it is a fraternal organization. This is important only as an aid in determining the disposition of the fund. We think the order is a fraternal or *224 beneficial association. Though the articles of incorporation and constitution and by-laws are not in evidence, its fraternal character is sufficiently shown from the certificate, which is in the form of an ordinary benefit certificate, in connection with evidence that the order had a ritualistic form of work, a representative form of government, and that benefit funds were collected monthly.

We do not know whether the constitution and by-laws make provision for the disposition of the fund, upon the death of a member whose beneficiary has predeceased him. Usually such provision is found in the laws of fraternal organizations. The statute, R. L. 1905, § 1703, as amended by Laws 1907, p. 538, c. 382, provides, in the case of benevolent and fraternal associations, that “payments of death benefits shall be made only to the families, heirs, blood relatives, adopted children, fiancee, of the member, or persons dependent upon him, or whenever his certificate of membership may so provide, the executor or administrator of the estate of the member in trust for such person or persons above mentioned as may be designated in such certificate.” This statute, which is much the same as Laws 1907, p. 470, c. 345, § 6, had its origin in Laws 1903, pp. 411, 526, cc. 276, 296. Dcvaney’s certificate was issued in 1899. At that time there wasvno provision of like effect, though Laws 1877, p. 224, c. 128, contained a recognition that fraternal insurance is for beneficiaries and not for creditors. In Meyer v. Grand Lodge O. S. H. 108 Minn. 25 , 121 N. W. 235 , it was held that section 1703 did not apply to a change of beneficiaries made prior to the time it went into effect. In Grand Lodge v. McKinstry, 67 Mo. App. 82 , it was held that when the certificate was prior to the statute, and the change of beneficiary after it, tire rights of the beneficiary were governed by the statute. Eeference is made to these statutes and cases merely as an aid to construction; and, for the same purpose, reference might be made to other statutes and cases showing a general policy to keep the proceeds of fraternal insurance free from the claims of creditors. We hold, in the absence of a designation of a beneficiary in place of the deceased one, and with the concession that there is no reversion to the order, and that the heirs of the deceased beneficiary dó not take, and with no showing of what, if anything, the constitution *225 and by-laws provided, that the insurance money goes to the plaintiffs, who take as beneficiaries, and not by descent. The authorities cited in the next paragraph, upon another point, support in a general way the result we reach in this connection.

2. The defendant Ileinen was appointed special administrator of the deceased on June 9, 1909. On the same day the defendant order paid him $1,000, and he receipted for it as special administrator, and afterwards apparently held it for the creditors, among whom was the bank of which he was an officer. The defendant order claims that by this payment it is released. Its contention is that it made the payment to the proper person, the special administrator, regardless of whether the creditors are finally entitled to it, or the heirs and next of kin to the exclusion of the creditors.

In Massachusetts and New York it has been held that the personal representative may sue, though the recovery is not for the estate. In Clarke v. Schwarzenberg, 162 Mass. 98 , 38 N. E. 17 , it was held that the executrix was entitled to the money in trust for the benefit of those entitled to be named as beneficiaries. In Pfeifer v. Supreme Lodge, 173 N. Y. 418 , 66 N. E. 108 , it was held that the administratrix of a deceased member who, by the terms of the policy, was “entitled in case of his death to the receipt by his heirs” of a fund, and who was herself one of the beneficiaries, might maintain an action to recover the fund as a quasi trustee for those represented by the word “heirs,” which was held to mean next of kin. There are some differences between these eases and the one at bai, and perhaps they could in a way be distinguished, but we make no attempt.

We are unable to agree that the personal representative of the deceased is a trustee for the beneficiaries. The statute does not make him a trustee. He is not made a trustee by the insurance certificate. He is not a trustee by contract. The fund goes to the heirs of the deceased as beneficiaries and not by descent. The administrator is not entitled to it any more than he would have been entitled to it had the mother of the deceased survived him, or any more than if he had exercised the right to appoint another' beneficiary in place of the deceased one. The fund does not go to the creditors whom *226 he represents. If he is trustee he can sue on the policy, and is the one who must sue. He is entitled to prosecute the suit and control the litigation and incur expense. The expense is not chargeable against the estate. He gives no bond to the beneficiaries. We do not understand how, in such a situation, the administrator becomes a trustee of the beneficiaries.

In Backdahl v. Grand Lodge, A. O. U. W. 46 Minn. 61 , 48 N. W. 454 , an action by the deceased’s heirs at law upon a beneficiary certificate payable to his “legal heirs,” it was held that the decree of distribution of the probate court was not evidence of heirship against the defendant. The theory was that such decree was binding as to the matters adjudicated, that is, the distribution of the estate, upon the parties to the proceeding, but was not evidence of the facts upon which it was based against a stranger. If that case was correctly decided, it is in support of the argument that the administrator takes nothing and is not a trustee. The following cases, in a general way, support the view we take: Warner v. Modern Woodmen, 67 Neb. 233 , 93 N. W. 397 , 61 L.R.A. 603 , 108 Am. St. 634, 2 Ann. Cas. 660; McClure v. Johnson, 56 Iowa, 620 , 10 N. W. 217 ; Rollins v. McHatton, 16 Colo. 203 , 27 Pac. 254 , 25 Am. St. 260; Eastman v. Provident Assn. 62 N. H. 555; Worley v. Northwestern Masonic Aid Assn. 10 Fed. 227 ; Silvers v. Michigan, 94 Mich. 39 , 53 N. W. 935 . The cases of Jewell v. Grand Lodge, A. O. U. W. 41 Minn. 405 , 43 N. W. 88 , and Brown v. Balfour, 46 Minn. 68 , 48 N. W. 604 , 12 L.R.A. 373 , are in harmony.

The defendant urges against our holding that it ought not to be required to pay the insurance money twice. The answer is that until now it has not been required to pay it at all.

It is urged that a hardship is put upon the order by requiring it to determine, at its peril, who the real beneficiaries are. This is not a very real peril. It is one to which the insurance company has been subjected in the cases cited from Minnesota and elsewhere. If a peril of moment, it could be guarded against by a direct agreement, or by a provision in the constitution or by-laws. Chapter 382, p. 537, Laws 1907, provides that the. certificate may provide for payment to “the executor or administrator of the estate of the *227 member in trust for sucb person * * * as may be designated in sucb certificate.” ' •

We hold tbat tbe payment to tbe special administrator does not relieve tbe defendant order from liability to tbe beneficiaries.

3. Tbe claim is made tbat tbe plaintiffs are estopped, or prevented by laches, from claiming tbat Heinen was not authorized to receive tbe insurance money. One of them petitioned for his appointment as administrator. Two or three of them knew that be was getting tbe money. It does not appear tbat the others did. Out of tbe money be paid the funeral expenses, and some of tbe plaintiffs knew of it; But he received more money from tbe estate than was needed for this purpose. We see no substantial ground for invoking an estoppel. Tbe heirs perhaps thought that Heinen was entitled to collect tbe money and would pay it to them. They made no immediate claim against the order. They delayed bringing suit. They made no objection to what was being done. Likely they had no very definite notion as to their legal rights or as to the prudent course of procedure. It will not do to require beneficiaries under a fraternal certificate, placed as tbe plaintiffs were, to interpret correctly tbe legal situation between themselves, tbe insurance order, and tbe administrator, at the peril of losing the insurance money if they mistake it.

4. John Heinen was made a defendant on tbe ex parte application of tbe defendant order. It is suggested tbat this was done under B. L. 1905, § 4069. This section refers to bringing in parties upon the motion of the plaintiff, and it has no application. Neither can tbe order making him a party be supported under section 4138 relative to interpleading, where a defendant sued by one claiming a fund may require another claiming the same fund to interplead, and upon paying the fund into court may be discharged, leaving tbe parties interested to litigate over tbe fund. Sucb was the case of Smith v. City of St. Paul, 65 Minn. 295 , 68 N. W. 32 . Tbat case has no bearing on this. Here tbe defendant has paid tbe fund to tbe administrator. It cannot pay it into court and make it the subject of litigation, and it cannot ask tbat it be permitted to bring the administrator in as a party and subject him to a recovery, which tbe *228 plaintiffs do not ask and may not want, and thus relieve itself. There was no ground, by statute or otherwise, for joining Ileinen.

Ileinen answered the complaint and the answer of the defendant company, as he was required to do by the ex parte order. When the case came to trial he protested, and protests upon this appeal, that he ivas not properly joined. In this he is correct. The court reserved its rulings on the various objections and motions of Ileinen in support of his contention. The record does not show that rulings were made. No finding should have been made by the trial court on any issue between the defendant order and Ileinen. He should have been dismissed from the case without prejudice. Having protested throughout that he should not be bound as a party, he cannot now complain, if the question of his liability is left to future litigation.

When tbe case is remanded, the trial court should strike out its eighth finding relative to tlio voluntary character of the payment by the order to Ileinen, and should amend its conclusions of law so as to direct that the action be dismissed as to Ileinen without prejudice to any right of action that may exist in favor of the defendant order against him. It is directed to do so.

Order affirmed.